2009-01-28-2008-12-03

To buy half of nuclear power generation and operations business.

Integrated utility company Constellation Energy Group Inc., Baltimore, (NYSE: CEG) has agreed to sell half of its nuclear power generation and operations business to French utility Électricité de France (EDF) for US$4.5 billion, spurning an offer from Warren Buffett's MidAmerican Energy Holdings Co., Des Moines, Iowa, to acquire the entire company for $4.7 billion in stock. Constellation holds a 38% ownership position in the upstream MLP Constellation Energy Partners LLC (NYSE: CEP). This is not part of the sale to EDF. The deal does include an option for EDF to acquire up to $2 billion in non-nuclear assets. As of year-end 2007 and including assets from the MLP, Constellation held some 655 billion cubic feet equivalent in proved reserves producing more than 67 million cubic feet equivalent per day. These assets are in Louisiana, South Texas, Wyoming, Arkansas' Fayetteville shale, Ohio, West Virginia, the Montana Williston Basin and offshore Alabama. These assets alone could be worth up to $2 billion on the market. Unlike the MidAmerican offer, Constellation will remain an independent publicly traded company under the EDF agreement while solving its liquidity problem. EDF currently holds a 9.5% stake in Constellation. EDF subsidiary EDF Development Inc. will make an immediate $1-billion cash investment in Constellation through the purchase of newly issued series B nonconvertible cumulative preferred stock, which will be surrendered to Constellation at closing and credited against the purchase price for EDF's 49.99% interest in Constellation Energy Nuclear Group. To provide Constellation additional liquidity, EDF will hold a two-year asset put option to buy up to $2 billion of non-nuclear power generation assets. EDF will also provide a $600-million interim backstop liquidity facility, which will remain available until regulatory approvals are received for the transfer of the non-nuclear assets that could be sold under the option. Constellation president, chairman and chief executive Mayo A. Shattuck III says, "This agreement with EDF Development provides an opportunity for Constellation Energy shareholders to achieve greater value for the company's significant asset base. The investment also provides the liquidity support to stabilize and grow our business as an independent public company dedicated to serving our customers across the country." The transaction is not subject to a financing condition. EDF Group will finance the transaction, including the agreed liquidity arrangements, through cash on hand and debt. Constellation terminated the Sept. 19 merger agreement with MidAmerican, a unit of Buffett's Berkshire Hathaway. In September, MidAmerican provided $1 billion of needed capital to Constellation. Under the provisions of the termination agreement, MidAmerican will receive a $175-million termination fee. In addition, shares issued will convert and MidAmerican will receive a $1-billion note at 14% interest, maturing Dec. 31, 2009; approximately 20 million shares of Constellation common stock, representing 9.99% of outstanding shares; and approximately $418 million in cash. Additionally, the $350-million liquidity resource will terminate. J.P. Morgan is advisor to EDF. Morgan Stanley, Rothschild, Credit Suisse and UBS Investment Bank are advisors to Constellation.